Jerry is an Assistant Director for the State of Tennessee, Comptroller of the Treasury, Division of Local Government Audit. The division has statutory responsibility for audits of approximately 1800 local governments and related organizations in Tennessee. A 31-year veteran of the division, Jerry has served as an auditor, audit supervisor, training instructor, technical manager, and assistant director. Jerry is a Certified Public Accountant (CPA), Certified Government Financial Manager (CGFM), and a Certified Fraud Examiner (CFE). In his role as assistant director, he is responsible for developing professional compliance procedures and monitoring the division s quality performance under GASB, AICPA, OMB, and GAO accounting and auditing standards. Jerry also has responsibility for supervising the contract review process within the division. Most recently, Jerry assisted the division in implementing GASB Statements 67 and 68. In addition, Jerry teaches training classes for the Tennessee Department of Audit (Yellow Book and Audit Findings). He has been selected as Instructor of the Year four times. Jerry has made training presentations for several other professional organizations including the Tennessee Society of Certified Public Accountants; Tennessee Government Finance Officers Association; National Association of State Auditors, Comptrollers and Treasurers; Association of Government Accountants; County Technical Assistance Service; Southeastern Intergovernmental Audit Forums; Nashville Chapter of the Association of Certified Fraud Examiners; and various county official s associations. Jerry currently serves on GFOA s CAAFR Committee, NASACT s Financial Management and Intergovernmental Affairs Committee, and NSAA s Audit Standards and Reporting Committee, Auditor Training Committee, and Peer Review Committee. He has served the National State Auditors Association External Peer Review program as a reviewer, team leader, and concurring reviewer and serves on the Special Review Committee for GFOA s Certificate of Achievement for Excellence in Financial Reporting program. Jerry has also provided training for the New York City Comptroller s Office and state auditors in Arkansas, Idaho, Kentucky, Minnesota, Mississippi, North Dakota, Montana, Arkansas, West Virginia, and North Carolina. In addition to these duties, Jerry currently serves on the state s Interagency Cash Flow Committee which operates under the authority of the Tennessee State Funding Board. Jerry was a partner in the accounting firm of Crosthwaite Durham and Associates. He also served as controller for Rural Healthcare of America, Inc., and taught accounting as a member of the adjunct faculty for Columbia State Community College and Austin Peay State University. Jerry received his accounting degree from the University of Tennessee at Martin. He is a member of the American Institute of Certified Public Accountants (AICPA); the Association of Government Accountants (AGA) and the Nashville Chapter where he served as chair of the CGFM committee; the Government Finance Officer s Association (GFOA) and the Tennessee Government Finance Officers Association (TGFOA) where he serves as state liaison to the Board of Directors; the Association of Certified Fraud Examiners (ACFE) and the Nashville Chapter of ACFE. Jerry is also a graduate from the Tennessee Government Executive Institute (TGEI) which is a training program for government leaders through the University of Tennessee. Jerry is married and has three children and three grandchildren.
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GASB stands for: Government Agency Standards Board Government Advisory Standards Board Governmental Accounting Standards Board Governmental Assessment Statistical Board None of the above 6
GASB is: A federal regulatory organization A department of the U.S. Office of Management and Budget An organization established by the 50 states to regulate accounting practice An independent non-profit organization All of the above 7
GASB: Establishes accounting law for state and local governments Establishes federal accounting standards Establishes U.S. governmental accounting, auditing, and internal control standards Establishes U.S. governmental accounting standards All of the above 8
GAAP: Generally accepted accounting practices Generally accepted accounting principles Governmental accepted accounting principles Governmental accepted accounting practices All of the above 9
Which is not true about new GASB Statements (e.g. GASB Statement 68)? Large governments with over $500M in revenues must follow the guidance (GAAP) Small governments with less than $50M in revenues do not have follow the guidance (GAAP) Government s in Tennessee have to follow the guidance (GAAP) Government s that do not follow the guidance (GAAP) will receive a modified opinion All of the above 10
Glad you Asked! http://www.gasb.org/ 11
GASB Governments Overview of Reporting Units and Opinion Units FOR DISCUSSION PURPOSES ONLY Financial Statements ---------------------------------------------------------------------------------------Basic Financial Statements------------------------------------------------------------------------------------ -- Government-wide Financial Statements Fund Financial Statements Fund Categories Governmental Funds Proprietary Funds Fiduciary Funds Reporting Units Governmental Activities Separate unit Businesstype Activities Separate unit Discretely Presented Component Units Each Major Governmenta l Fund Separate unit for each Aggregate Nonmajor Governmental Funds Each Major Enterprise Fund Separate unit for each Aggregate Nonmajor Enterprise Funds Internal Service Fund Type Pension (and Other Employee Benefit) Trust Funds Investment Trust Funds Private- Purpose Trust Funds Agency Funds Opinion Units Aggregate all as single unit "Remaining fund information": Aggregate all as a single unit Option to combine Accrual Basis Modified Accrual 12
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Tennessee Authorized Investments Legal Provisions. Counties are authorized to make direct investments in bonds, notes, or treasury bills of the U.S. government and obligations guaranteed by the U.S. government or any of its agencies; deposits at state and federal chartered banks and savings and loan associations; bonds of any state or political subdivision rated A or higher by any nationally recognized rating service; nonconvertible debt securities of certain federal government sponsored enterprises; and the county s own legally issued bonds or notes. These investments may not have a maturity greater than two years.
Tennessee Authorized Investments (cont d) The county may make investments with longer maturities if various restrictions set out in state law are followed. Counties are also authorized to make investments in the State Treasurer s Investment Pool and in repurchase agreements. Repurchase agreements must be approved by the state Comptroller s Office and executed in accordance with procedures established by the State Funding Board. Securities purchased under a repurchase agreement must be obligations of the U.S. government or obligations guaranteed by the U.S. government or any of its agencies. When repurchase agreements are executed, the purchase of the securities must be priced at least two percent below the fair value of the securities on the day of purchase.
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (consistent with GASB Concepts Statement 6) An exit price Other characteristics of fair value Market-based, not an entity-specific measurement Based on a government s principal or most advantageous market 18
Definition An investment is a security or other asset that is held primarily for the purpose of income or profit and with a present service capacity that is based solely on its ability to generate cash or to be sold to generate cash. Service capacity refers to a government s mission to provide services. Held primarily for income or profit acquired first and foremost for future income and profit. Assets that meet the definition of an investment generally are to be measured at fair value. Exceptions to fair value include money market funds or 2a7-like external investment pools.
Consist of three levels: Level 1: quoted prices (unadjusted) for identical assets or liabilities in active markets that a government can access at the measurement date Level 2: Inputs, other than quoted prices included in Level 1, that are observable for an asset or liability (either directly or indirectly) Market quotes for similar assets Yield curves that are observable at commonly quoted intervals Level 3: Unobservable inputs for an asset or liability Such as management s assumption of the default rate among underlying mortgages of a mortgage-backed security. 20
Type of Investments Measurement Applicable Guidance Investments in nonparticipating interestearning investment contracts Investments in unallocated insurance contracts Money market investments and participating interestearning investment contracts with maturity of < one year and are held by government other than external investment pools Cost-based measure Statement 31, par. 8 Interest-earning investment contracts 21 Statement 31, par. 8 Statement 59, par. 4 Amortized cost Statement 31, par. 9
Type of Investments Measurement Applicable Guidance Investments held by 2a7-like external investment pools Fully benefit-responsiveness synthetic guaranteed investment contracts Amortized cost Contract value Statement 31, par. 16 Statement 53, par. 67 Investments in life insurance contracts Cash surrender value 22
Money Market Investments? Maturity at Purchase of one year or less Short-term, highly liquid debt instruments Commercial Paper Banker s Acceptance U.S. Treasury and Agency Obligations Valued at amortized cost Local Government Investment Pool? Fair Value (unless they meet certain criteria under GASB 79)
Acquisition Value (AV) Price paid to acquire an asset with equivalent service potential in an orderly market transaction or amount a liability could be liquidated with a counterparty at the acquisition date Assets that should be measured using AV: Donated Capital Assets (developers) Donated works of art, historical treasurers, etc Capital Assets received in a SCA 24
Fair value is now based on: A. An exit price B. An entry price C. Either, depending on the investment
Observable inputs would normally be categorized within what level(s)? A. Level 1 B. Level 2 C. Level 3 D. Level 1 or 2, depending on the investment
Donated capital assets should be valued based on which of the following? A. Exit Price B. Selling Price C. Acquisition Price D. All of the above, depending on the situation
Practice Issue - GAAP Hierarchy: The Hierarchy will be reduced from four categories to two categories: A. Officially established accounting principles Governmental Accounting Standards Board (GASB) Statements. (And the GAAP Codification when Statements are added) B. GASB Technical Bulletins; GASB Implementation Guides; and literature of the American Institute of Certified Public Accountants (AICPA) if specifically cleared by the GASB. The AICPA literature will contain a statement that indicates it has been cleared (i.e. the majority of the Board Members did not object to its issuance) by the GASB. Such as Industry Audit Guides 29
Practice Issue - GAAP Hierarchy: After the two categories of authoritative literature, accountants will utilize nonauthoritative guidance: Sources of nonauthoritative accounting literature include GASB Concepts Statements; pronouncements and other literature of the Financial Accounting Standards Board, Federal Accounting Standards Advisory Board, International Public Sector Accounting Standards Board, International Accounting Standards Board, and AICPA (other than AICPA literature cleared by the GASB); practices that are widely recognized and prevalent in state and local government; literature of other professional associations or regulatory agencies; and accounting textbooks, handbooks, and articles. 30
Practice Issue Certain External Investment Pools and Pool Participants: Exposure Draft Expected 2 nd Q 2015 Statement 79 issued December 2015 Effective Date, fiscal year ending June 30, 2016 Because of a change in SEC rules relative to money market funds, many external investment pools may face interest rate risks that create fair value losses. This standard will address appropriate measurement and disclosure requirements. 32
GASB proposes to replace Rule 2a-7 criteria with its own GAAP based criteria. As proposed Use of Amortized Cost remains purely optional Use of Fair Value is always permitted Once a pool has elected to use Fair Value, it cannot subsequently reverse that election Amortized Cost (Stable Net Asset Value NAV Per Share) Criteria: Maturity Requirements Quality Requirements Diversification Requirements Liquidity Requirements Meets Shadow Price Requirements 33
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